What happened

Shares of Aurinia Pharmaceuticals (AUPH -4.62%) were up 14% at 3:35 p.m. EST on Tuesday as investors anticipated the release of clinical trial data for the biotech's lead drug voclosporin.

So what

In October, Aurinia said the last patient had a final study visit in the Aurora phase 3 clinical trial testing voclosporin plus Roche's CellCept in patients with lupus nephritis. Aurinia indicated that results would be reported by the end of the year.

With a little over a month left before the calendar changes over, biotech investors are jumping in ahead of the binary event.

Voclosporin is Aurinia's only drug, so the results are pretty close to a make-or-break event for the company. Aurinia is testing the drug in a couple of other diseases -- focal segmental glomerulosclerosis that affects the kidneys and dry eye syndrome -- but they're further back in the clinic, so a failure in lupus would delay the drug getting to market for years.

Lupus has been a notoriously difficult disease to treat, in large part because the waxing and waning over the course of the disease can affect clinical trial outcomes. In the phase 2b study, voclosporin more than doubled the remission rate at 48 weeks, from 24% for CellCept alone to 49% for voclosporin plus CellCept. The substantial difference offers some wiggle room for a successful clinical trial even if the phase 3 results aren't quite as good as the phase 2b study.

Man in suit extending a bull figurine with a bear figurine in the other hand

Image source: Getty Images.

Now what

Even after today's move, there's still plenty of upside left for Aurinia if the phase 3 study is successful. Investors just need to keep in mind that the binary event is quite risky and the downside risk shouldn't be ignored.